The Berejiklian backflip: chaos reigns

NSW insurance brokers are in a unique position to observe the impact of the State Government’s remarkable backflip on emergency services levy (ESL) reform.

Sitting between underwriters and clients, they have a clear view of the effects of the last-ditch change, which sent shockwaves through the industry.

And the verdict? Total chaos.

At the end of last month Premier Gladys Berejiklian and Treasurer Dominic Perrottet announced delays to the reform, which would have seen the levy on insurance replaced by a levy on property rates.

They claimed many SMEs would have been worse off under the new arrangement.

Insurers were dismayed. In many cases they had already removed the levy, adjusted their systems accordingly and had been called before ESL Insurance Monitor Allan Fels to pledge that savings would be passed on to customers in full.

Brokers have told insuranceNEWS.com.au they are every bit as appalled as the insurers.

Peter Brown, director at Peter Brown & Associates in Wagga Wagga, says his company has been telling clients for the past year they can expect a reasonable premium reduction when they renew on July 1.

He says confusion now reigns, with some insurers having already removed the levy but others still charging it.

Aside from the levy, some underwriters have increased the base premium for a variety of reasons, including rising claims.

While the financial impact on the broker is minimal, it’s not a good look.

“It’s the inconvenience of telling your clients one thing and then having to tell them the complete opposite,” Mr Brown says.

“I feel sorry for the underwriters – all that work that’s been wasted. [The reform] was a great idea to start with, but has turned into a shambles.

“I don’t know how NSW could get it so wrong when other states have made similar changes successfully. It’s been the most amazing stuff-up, a shemozzle.”

Grant Richmond, director at Oxley Insurance Brokers in Port Macquarie, told insuranceNEWS.com.au he is “deeply disappointed” with the Premier’s backflip.

“It has created uncertainty for our staff and clients, and caused delays with renewals in the busy month of June,” he says.

“Nothing is clear and we were surprised with this decision so late in the process.”

Mr Richmond says all policies he has seen have removed the levy from July 1.

But he says the future is far from clear, and his business is unable to advise clients at this stage as to how the Government will recover lost revenue.

Mr Richmond says a property-based charge would have been a fairer way to collect the levy.

“We prefer to be providing clients with reduced insurance bills,” he told insuranceNEWS.com.au.

“The frustration for insurance professionals is that we’re not able to answer these questions at this stage because the NSW Government hasn’t yet explained what the changes are and how they’re going to work.

“The level of taxes on insurance in NSW is already extremely high. When you take into consideration the ESL, stamp duties and GST, more than 30% of household insurance premiums and 40% of business insurance property premiums go straight to the Government.

“Removing the ESL component was seen to be a big step in the right direction, so this announcement sends mixed messages to the entire community.

“When WA phased out its emergency [services] insurance levy, the rate of non-insurance dropped from more than 25% to less than 10%. It seems out of step that other states were able to achieve this sort of positive outcome while NSW cannot.”

National Insurance Brokers Association CEO Dallas Booth told insuranceNEWS.com.au the Premier’s pledge that policyholders would not pay “a single dollar more” may be impossible to achieve.

“It will take insurers 2-3 months to reinstate the levy properly,” he says. “Therefore, there will be a funding shortfall and the levy won’t just go back to where it was; it will be more.

“The past couple of years they collected about $800 million – if they want to collect that same amount in less than 12 months, then a greater burden will fall on fewer policyholders.”

He says the insurance industry has expressed “the strong view” in meetings with NSW Treasury that the Government should bear the cost of any shortfall.

A shemozzle indeed.

And good luck to the Premier, the Treasurer and the monitor in sorting it out.